UPDATE: Wood Group Sees Minimal Impact From Gulf Of Mexico Oil Spill

1st Jul 2010 10:26

(Adds background, analysts' comments.) By Iain Packham Of DOW JONES NEWSWIRES LONDON (Dow Jones)--John Wood Group PLC (WG.LN) said Thursday that the Macondo incident in the Gulf of Mexico isn't expected to materially impact its financial performance in the current year, adding that only 4% of revenue--primarily in subsea and topsides engineering--is related to new deepwater developments in region. The international oil services company said overall, performance for the Group is in line with expectations and it expects 2010 performance to be in line without giving any further detail. Evolution securities analyst, Keith Morrris, said that although 2010 should be in line with expectations this still represents a year on year drop in earnings of 11%. The company said the longer term fundamentals for its services and products remain strong and it is continuing to extend its services and broaden its international presence, but didn't provide any further information. The engineering unit has performed as expected with improved bidding volumes giving increased confidence in a return to growth in 2011, the firm said. Activity in its production facilities unit is robust in the North Sea and the company said it continues to see an increasing level of international opportunities. In 2009, engineering and production facilities accounted for 66% of group revenue. The well support unit--representing 17% of revenue in 2009--has seen stronger activity in the U.S., Wood Group said, reflecting the higher than anticipated rig count. The good international performance should result in earnings before interest, taxes and amortization for the year ahead of expectations. However, Wood Group warned that 2010 EBITA in its gas turbine services unit is likely to be below expectations which it blamed on continuing maintenance deferrals by customers and lower activity in power solutions. Credit Suisse said it believes that an increase in offshore oil and gas spend will feed through into early cycle engineering earnings more rapidly than it will for the late cycle construction names. The brokerage has kept an "Outperform" rating on the stock and maintains a target price of 473 pence. Evolution Securities recently cut Wood to "Neutral" from "Add" and has maintained the target price at 400 pence. Shares at 0900 GMT down 5.1 pence, or 1.6%, at 308.1 pence in a slightly lower FTSE 250 Market--down 1.69% -By Iain Packham, Dow Jones Newswires; 44-20-7842-9269; [email protected] (END) Dow Jones Newswires July 01, 2010 05:26 ET (09:26 GMT)